Capacity auction predicts higher energy bills; Youngkin, governors air frustrations in letter to PJM

Regional electric grid operator PJM Interconnection’s capacity auction on Tuesday showed an incredible cost jump, breaking records from last year that led to major increases in bills for some consumers across the 13-state region — and setting the stage for rising electricity bills.

With higher costs on the horizon, Virginia Gov. Glenn Youngkin joined governors from eight PJM states in a letter to the power provider, laying out their irritation with the transmission costs and grid reliability and asking for a say in who will fill the vacant seats on the decision making board.

Youngkin signed the bipartisan letter asking for a meeting this week with PJM leaders to share the governors’ ideas of who should fill the two seats on the Board of Managers. The governors recommended people who are familiar with the energy crisis facing these states and could strengthen the public’s trust.

How the capacity auction works and why higher energy bills are coming

Every year, PJM holds a capacity auction to allow companies to provide the estimated power demand in future years. PJM calculates how much power will be needed in high use days and adds some in reserve. Then, energy providers can bid to provide that power until PJM meets the target estimation. Those funds paid to the bidders come from consumers through their utility bills.

On Tuesday, PJM announced its capacity prices increased from $14.7 billion last year to $16.1 billion at this year’s auction, costs that will be paid by ratepayers in Virginia and the other 12 states in the grid operator’s coverage area, and Washington, D.C., in 2026 and 2027.

Last year, PJM saw a massive jump in the capacity cost for most of the region from $28.92 megawatts a day to $269.92 MW a day. The results of the auction this year to cover the next two years came out to an increase to $329.17 MW per day. Sixty-five million customers in PJM’s footprint could see an additional 5% increase in their bills.

Dominion Energy, which covers about 2.7 million customers in Virginia, was able to avoid the cost increase in 2024 due to the company generating a majority of its own energy, and the rest was mainly managed through wholesale power purchases in the PJM region. Other utilities were not as fortunate and some customers saw double digit dollar increases on their bills across the states. Dominion Spokesperson Aaron Ruby said capacity auction costs only amount to about $2 on a monthly bill.

In PJM’s release about the results of the capacity auction, the organization said the peak load increased year to year by 5400 MW. This was largely driven by data centers, electrification and economic growth.

PJM stated it has worked through more than 60% of the transition backlog in its interconnection queue under new federal reforms with another 63,000 MW in projects slated for review in 2025 and 2026. 

“While more than 46,000 MW of installed capacity of already-approved resources have yet to be built, many are navigating challenges outside PJM’s scope, such as permitting timelines, supply chain constraints and evolving project economics,” the agency stated in the release.

Governors, clean energy advocates sound off

Governors across most of PJM’s coverage area are fed up with the cost of utilities continuing to grow and the transmission organization slow walking some energy project approval that could help support the grid, they said in the July 16 letter they sent to PJM. 

“We are deeply concerned that PJM’s response has been typified by halting, inconsistent steps and rising internal conflicts within the stakeholder community that have recently culminated in the abrupt termination of two long-standing members of the Board of Managers and the imminent departure of the CEO,” the letter stated.

The letter was signed by the governors of Delaware, Illinois, Kentucky, Maryland, Michigan, New Jersey, Pennsylvania, Tennessee, and Virginia. The governor of Ohio later sent a letter in support of the other governors’ requests. Two of those states, Pennsylvania and New Jersey, have recently threatened to leave PJM due to the high rise in energy costs and the slow process of getting more energy sources on the grid. 

Virginia is the top energy importer in the country with 36% of the state’s power coming from other states in 2023. The state is also home to a third of the entire world’s power-thirsty data centers, which has created mounting challenges to provide affordable energy to consumers.

“This is a factor that really influences a lot of the economic engines of their states. And so it makes total sense that they will want to have more engagement to ensure that states are real stakeholders in the process,” said Julia Kortrey, deputy state policy director for Evergreen Action, a national climate change advocacy group.

The governors bashed PJM on its “crisis of confidence” from the states and consumers. 

“At a time of rapidly rising load growth, PJM’s multi-year inability to efficiently connect new resources to its grid and to engage in effective long-term transmission planning has deprived our states of thousands of jobs and billions of dollars in investment that may flow to other regions. Now these deficiencies threaten the bedrock reliability and affordability our consumers expect and deserve,” the governors wrote.

Renewable energy advocacy organizations also weighed in on the issues following PJM’s auction.

“Despite repeated warnings from governors, advocates, and industry leaders, PJM continues to slow-walk clean, low-cost energy while doubling down on expensive, unreliable fossil fuels. This year’s auction is a historic and costly reminder for 65 million consumers that PJM’s system is broken,” Kortrey said.

Two seats are vacant on PJM’s Board of Managers, which is tasked with making sure the agency is fulfilling its business, legal and regulatory requirements. It is also supposed to ensure PJM has a reliable grid and administers fair energy markets. The board has nine voting members who serve three-year terms. The PJM CEO sits on the board but does not vote. 

During the May 12 meeting of the board, two incumbent board members did not get enough votes from PJM members to maintain their seats. Members who get a vote in the board makeup are electric distributors, consumer advocate offices, generation owners, transmission owners, and other suppliers. The nine governors who signed the letter have a batch of candidates to fill the two open seats they feel would best understand the challenges the states are facing.

“They must be individuals who understand the concerns of ratepayers facing rising costs and who will be ready to collaborate with the incoming CEO to instill a new, more collaborative and more effective ethos at PJM,” the letter said.

They also ask for a public vote for the new members to bring transparency to the process. The chair of the Board of Managers, David Mills, sent a letter back to the governors explaining how the nominating committee makes their decisions for qualified candidates. He also appeared to take offense to some of the accusations the governors made about the energy provider in their letter.

“PJM’s work has recently been publicly recognized by the current and former chairs of the Federal Energy Regulatory Commission. Our operators are keeping the lights on through some of the most challenging circumstances that any grid operator, anywhere, has faced in its history,” Mills said in his response.

He laid out ways PJM has taken steps to address the concerns brought up by the governors such as the Reliability Resource Initiative, temporary capacity market cap/floor construct, and other methods.

Representatives from the governors’ offices traveled to Pennsylvania for the July 23 meeting to share their thoughts on the nominating process for the board seats. This, just a day after PJM saw another record high year for its capacity auction costs.

The next auction for the 2027/2028 years will be in December of 2025.

This article first appeared on Virginia Mercury and is republished here with permission. Virginia Mercury is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Samantha Willis for questions: info@virginiamercury.com.

Virginia Mercury is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Samantha Willis for questions: info@virginiamercury.com.